Tactics to Extend Your Retirement Reserves
By Anthony Rhodes
At the turn of the last century, the average
American was expected to live to the ripe old age of 49. This may sound
surprising to those of us living within such perceived technologically advanced
times as we do today, but when you consider that their counterparts of
100 years prior lived only until around the age of 28, the role which
technology played in their extension of life was nonetheless equally as
impressive. However, this truly is a great time to be alive. With
advancements in medicine taking place seemingly on a monthly basis, and
constant annual improvements in sanitation and overall living conditions,
Americans living today can honestly look forward to life well into their upper
seventies, and with proper diet and exercise regiments, even beyond that.
Now for the bad news.
While the contributions of these new advancements
have undoubtedly succeeded in their attempts at increasing our longevity, the
question as to whether the quality of such extended lives will also be
improved, remains in serious doubt. That’s because, while most Americans marvel
at the thought of living into their eighties, nineties and older, conventional
thinking and preparation throughout their working years, decreed their finances
to last only until their late sixties and early seventies, thereby leaving a
tremendous financial burden for those unprepared for this new reality. This
week, we’ll take a look at some actions which you can take to help extend the
life of your portfolio, and will attempt to remind, that whether you live to be
one hundred years or even older, the lesson of proper planning never loses its
importance with time.
Target: Retirement
Without
a doubt, the most important thing that you can do to extend the life of your
portfolio is to establish a retirement target. This is the amount of money
which you will need to sustain you for the duration of your retirement years.
While most investors should have a financial plan constructed to determine what
their specific target should be, a general rule of thumb is to take your
current salary and multiply it by ten; which should allow you to maintain your
current economic lifestyle throughout your retirement years. The thinking
behind this strategy is pretty straightforward: you take out 10% per year to
live on, and invest the remaining portions in assets that need to grow 10%
annually, in order to recoup the amount which you’ve deducted. And while there
will be years in which your portfolio performs above and below this number,
over the entirety of your retirement years, it needs to average 10% growth; which makes this a realistic goal to pursue,
and a viable tactic to endorse. Another reason why this is such a good idea, is
that it provides an individual with a specific monetary goal to obtain. Once a person
knows exactly how much he or she needs to procure during their working years,
they immediately become more apt to contribute to their retirement plans, and
more adept at selecting the appropriate investment products. Becoming proficient
in these areas will help your portfolio to grow consistently during your
working years, and will increase the likelihood that your desired target will
be met upon your eventual retirement.
Capitalizing on Political Capital
Every politician understands that the investment community
represents an important, bi-partisan demographic amongst registered voters; and
as such, is prone to pass legislation benefiting such a constituency, in efforts
to remain in their good graces. This fact has always been known, but as
investors have increased in rank, popularity and political influence, has become
even more so. In recent years, laws have been passed which increases the
amounts an individual can contribute to their retirement plans, and even adds
“catch up” contributions for those over the age of 50. There have also been new
investment products created, and new rules formulated, which enable greater
transparency for existing investment products. These new statutes, and others
like them, enable investors to potentially add thousands of qualified dollars
to their portfolios, which would not have existed just a few short years
earlier. But in order to take advantage of these new mandates, you need to be
aware of their existence, which highlights the importance of being informed. To
accomplish this feat, you might want to subscribe to various legislative
publications, or talk to financial advisors, in an attempt to stay abreast of
all new relevant legislative initiatives. You can also visit certain government
departmental sites, or read financially derived blogs, in order to maximize
your adherence.
As technology and medicinal advances continue to
extend the boundaries of our existence, we can all begin to anticipate a time
in which age, disease and even death will lose their ability to dictate the
courses of our lives. And while such a possibility appears to hold unimaginable
benefits, it also magnifies the significant role that money will continue to
play in our future, and highlights the importance of our planning for it
to last just as long as we will.
(Anthony
Rhodes is a Registered Investment
Advisor and owner of wealth management firm The Planning Perspective www.theplanningperspective.com )
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